Stocks Hold Gains; Nasdaq Back Above 3000

The major U.S. equity averages are building on recent gains as the political rhetoric around the fiscal cliff continues to grab headlines.

Andrea Tse

NEW YORK (TheStreet) -- The major U.S. stock averages continued to hold modest gains in afternoon action Thursday despite a prominent Republican legislator throwing cold water on the perception that U.S. budget talks were gaining momentum.

House Speaker John Boehner was quoted as saying there's been no "substantive" progress as yet in the ongoing bi-partisan negotiations to avoid the fiscal cliff, according to media reports.

The Boehner headlines brought stocks off their session-highs and briefly drove the Dow into negative territory.

At last check though, the Dow Jones Industrial Average was rising more than 48 points, or 0.37%, at 13,033. Earlier in the session, the blue-chip index climbed as high as 13,062.

Winners were ahead of losers in the Dow, 25 to 5. The biggest percentage gainers within the index were Caterpillar(:CAT), Hewlett-Packard(:HPQ), and UnitedHealth(:UNH).

Shares of Walt Disney(:DIS) were up 1.1% after the entertainment and media giant announced a 25% boost to its annual dividend, bringing the payout to 75 cents a share.

Prominent Dow decliners included Intel(:INTC), Home Depot(:IBM), and Microsoft(:MSFT), which slumped following a report that sales of Windows-based PCs slumped after the release of the company's Windows 8 operating system software update.

Intel shares were down more than 2% as The Wall Street Journal reported that Japan's Sharp is in talks with Dell(:DELL), Intel and Qualcomm(:QCOM) about a possible capital injection to help it bolster its balance sheet, citing people familiar with the discussions.

The S&P 500 was up more than 7 points, or 0.50%, at 1417, while the Nasdaq was gaining more than 20 points, or 0.67%, at 3012. It was the index's first trip above the 3000 level since Nov. 6.

The strongest sectors in the broad market were consumer cyclicals, basic materials, health care and financials.

Advancers were outpacing decliners by a nearly 2.2-to-1 ratio on the New York Stock Exchange and a roughly 2.5-to-1 ratio on the Nasdaq. Volume was above 2.27 billion on the Big Board and 1.22 billion on the Nasdaq.

"Fiscal cliff concerns continue to be front and center, as the rumors from Washington tends to drive the overall market action for that day," said Ryan Detrick, senior technical strategist with Schaeffer's Investment Research, adding later: "The fiscal cliff is a big deal, but we wouldn't be surprised if once again the overall fears are already priced into things here."

A bright spot in the latest U.S. economic data came courtesy the National Association of Realtors, which reported its pending home sales index showed a rise of 5.2% in October to its highest level in more than five years after increasing by an upwardly revised 0.4% the previous month. Economists had forecast a rise of 0.8%.

"Given the very high correlation between this indicator and actual existing home sales activity, we expect the pace of home sales in November to improve," said Millan Mulraine, senior U.S. macro strategist at TD Securities.

But Thursday's other datapoints prompted some caution commentary from economists.

The Labor Department reported that initial jobless claims for the week ended Nov. 24 were 393,000, a decrease of 23,000 from the previous week's upwardly revised figure of 416,000. The four-week moving average was 405,250, an increase of 7,500 from the previous week's average of 397,750.

Economists were predicting initial jobless claims would come in at 390,000.

Bricklin Dwyer, an economist at BNP Paribas, said that jobless claims may have receded from their post-hurricane surge but remained elevated.

"For the month, claims are running 38k higher than in October, which is suggestive of a very weak employment report in November," he noted.

On top of the lingering influence of the Hurricane Sandy superstorm, the week ended Nov. 24 was affected by the Thanksgiving holiday, which likely decreased the number of claims filed in the holiday-shortened week, Dwyer said.

Continuing claims for the week ended Nov. 17 were 3.287 million, a decrease of 70,000 from the preceding week's upwardly revised level of 3.357 million.

The second estimate on U.S. third-quarter gross domestic product showed a rise of 2.7%, compared with the previous 2% growth estimate. GDP was forecast to rise by 2.8%.

Paul Ashworth, chief U.S. economist at Capital Economics, said that while the GDP release showed a welcome upward revision most of the growth was driven by inventory building and government spending.

"The bigger the inventories build up in the third quarter, the more likely we are to see a run down in the fourth," he noted.

Capital Economics estimates fourth-quarter GDP growth is now likely to come in a little below 2%.

Overseas markets were stronger Thursday amid optimism on U.S. budgetary negotiations. The FTSE 100 in London was rising by 1.22%, while the DAX in Germany was up by 0.79%. Japan's Nikkei average and Hong Kong's Hang Seng index each closed up by 1%.

The Asian markets also got a lift as Japan's main opposition leader Shinzo Abe, who is tipped to become the next prime minister, continued to call for more aggressive monetary policy easing.

Gold for February delivery was rising $10.80 at $1,729.60 an ounce at the Comex division of the New York Mercantile Exchange, while January crude oil contracts were up $1.82 at $88.31 a barrel.

The benchmark 10-year Treasury was up 5/32, lowering the yield to 1.614%. The dollar was off 0.10%, according to the U.S. dollar index.

In corporate news, Tiffany & Co.(:TIF), the upscale jewelry retailer, posted disappointing third-quarter results and cut full-year profit expectations as the company was challenged by continued high precious metal and diamond costs, economic weakness and a higher-than-expected tax rate. Shares were tumbling by more than 7.5%.

Grocer Kroger (:KR) raised its fiscal 2012 adjusted earnings per share guidance after posting better-than-expected third-quarter results as identical supermarket sales growth, without fuel, came in at 3.2% in the quarter. The stock was rising more than 3.5%.

Barnes & Noble(:BKS), the book seller, posted a second-quarter loss of 4 cents a share, including the impact of its dividend on redeemable preferred shares, on revenue of $1.9 billion; analysts, on average, predicted a quarterly loss of 11 cents a share on revenue of $1.91 billion.

"We expect our two highly acclaimed new NOOK products, and our Microsoft partnership on Windows 8 to further fuel the growth of our digital business, and are encouraged by the promising start to the holidays in our retail and digital businesses," said William Lynch, CEO of Barnes & Noble, in a statement.

Shares were tumbling more than 8.5% after an initial pop after the announcement.

Shares ofAeropostale(:ARO) fell more than 6% after the retailer gave fourth-quarter earnings guidance of 36 to 41 cents a share, well below the consensus view for a profit of 54 cents a share.

Late Wednesday,NCR (:NCR) agreed to acquire Israeli software company Retalix (:RTLX)for $30 a share, or $650 million. NCR shares were up nearly 2% and Retalix shares were flat after a huge jump in yesterday's session.

Limited (:LTD) shares were tacking on more than 1.5% after the specialty retailer booked a better-than-expected 5% rise in November same-store sales.